I think it is really important to talk about this as openly and casually as possible. Kids are very good at picking up on parental discomfort and can easily get the message "they don't want to talk about this" - and then they go to other sources!
I always tried to think about how I would respond if they asked about any other topic. "How does the picture get in the TV?" for example. Well, I'd do my best to explain as fully as I could in language the child understands. Maybe with diagrams if I thought that would help. So that's how I responded to questions about sex.
Will they understand all of it the first time? No, but neither do they understand everything the first time you explain anything else (like manners, reading, how cars work, etc.). That's why you have to repeat things so often, or discuss different aspects.
My main goal wasn't to get every fact embedded in their brains. It was to make sure they knew that I was someone they could talk to about these issues, that I wouldn't be upset or flustered or brush them off but would give them (or help them find) accurate information. It worked well (my kids are in their 20's).
When my second son was 10, he asked me "I know how men and women have sex, but what do two gay men do? Or two lesbian women?"
Teresa